Modern Ghana, June 03, 2023
By Pradeep S. Mehta
Rising carbon emissions and biodiversity losses, which have resulted in huge imbalances, pose one of the gravest threats to the existence of mankind. The vagaries of human-induced environmental threats spare none, with every section being battered by its ill effects. Vulnerability of socially and economically weaker sections is compounded by their position, but it doesn’t mean that the more privileged are likely to get away. This calls on the privileged few to think of and put in place innovative finance solutions to deal with the crises arising from the huge climate and biodiversity losses and their deleterious impact on the human race.
Recent Commitments on Climate and Biodiversity
A Loss and Damage (L&D) Fund was established at the Twenty Seventh Conference of Parties to the United Nations Framework Convention on Climate Change (COP27) summit in Sharm-el-Sheikh, Egypt in November, 2022. The Fund, as its name suggests, is proposed to be set up to assist developing countries that have been harmed and are ‘particularly vulnerable’ to adverse effects of climate change. However, negotiations on the fund’s finer details are yet to be worked out. Whatever may be agreed, it is doubtful if the promises will be kept. Our history is replete with failed promises.
Rich countries failed to meet the annual $100bn commitment to support developing countries in addressing the impacts of climate change, a commitment made at the 2009 Copenhagen Summit.
The fifteenth Conference of Parties to Convention on Biodiversity COP (CBD15), held in Montreal in December 2022, resulted in a global commitment to raise international financial flows from developed to developing countries to at least $30bn per year, by 2030. Going beyond, the Summit also saw enthusiastic members committing themselves to mobilise at least $200bn per annum from public and private sources for biodiversity related funding, by 2030. But again there is no clear roadmap to meet the goals.
Hazy negotiations raise suspicions about the possibility to meet the above targets. Hence, the need for innovative agnostic solutions with a clear implementation strategy, which is free from political vagaries, becomes critical.
Creating a fund for Environmental Recovery and Innovative Finance
While COP27 saw several countries expressing an interest in exploring ‘innovative sources’ of finance, nearly six months later these sources or are yet to be identified or a broad canvas designed. The G20 Bali Leaders’ declaration, in November, 2022, too called on leaders of G20 countries to unlock innovative sources of financing to support the achievement of SDGs in lower- and middle-income countries. The declaration further exhorted multilateral development banks to mobilize and provide additional financing, to address global challenges. However, the identification and implementation of such precise solutions and their methodology has not seen any tangible progress. Hopefully, the G20 summit in India will dive deeper with concrete plans rather than expressing platitudes.
A number of funds have been created over the last 30 years, with a host of commitments to address concerns of climate change. To name a few, the Green Climate Fund (GCF), Adaptation Fund, Special Climate Change Fund (SCCF) have been created over the years to support global climate and environmental financing efforts. But, the gaps between requirements and commitment still exist and are worryingly widening.
In order to create an overarching fund for the planet’s recovery, there are various proposals being discussed such as a Global Carbon Tax, Digital Services Tax, Property Tax, Airplane Tax, Cesses for Carbon Emissions, Biodiversity, Climate Resilience, Climate Adaptation, Financial Transactions Tax (FTT) etc. All these together can be a good bouquet to create a fund of funds to deal with both climate and biodiversity issues.
Delivering meaningful finance solutions is intrinsically connected to our efforts to arrest the backslide of targets set out under the Sustainable Development Goals (SDGs).
SDG 13 (which covers Climate Action), calls upon states to take urgent action to combat climate change and its impacts. Similarly, SDG 15.5 calls for taking urgent action to reduce the degradation of natural habitats and halt the loss of biodiversity.
Holistic Approach – Engaging other stakeholders
Private capital financing has a vital role to play in plugging the gaps for global sustainable financing, particularly so in emerging markets and developing economies, where governments are inhibited by capacity constraints. Raising the scale of private capital financing in sustainability initiatives could help infuse billions towards a host of initiatives. There is a need to create an ecosystem which incentivises creation of financial assets that can contribute towards emissions reduction and biodiversity conservation targets. Though private capital financing has increased over the last decade, it needs to be scaled up significantly if the world wishes to meet the agreed targets.
As the ill effects of climate and biodiversity losses take a toll on the planet and the human race, the world urgently needs an overarching framework which is transparent, verifiable, agnostic and accountable. Targets ascertained by the international community, as indicated above can only be met if the international community follows up with timely allocation of the required funds, which will require exploring a variety of resources through a bouquet approach.
Since we face a race against time to leave a cleaner and greener world for future generations, delivery of critical action should not just be adequate, but also timely.
The author is Secretary General, CUTS International. Jayesh Mathur of CUTS contributed.
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